Clear Eyed Capitalist

Archive for November, 2007

I’ve been re-evaluating how I run my family foundation and I recently re-read my foundation bylaws. In an effort to live up to my social justice mission, I’ve been working to involve community members and grantees in my granting decisions. One squidgy issue has been ethical concerns about having members of grantees actually on my board. Because board members are prohibited from benefiting personally from grant money, we need to draw careful policy lines about who votes on what to make sure that no one can be accused of directing dollars into their own pocket. This has always seemed like a perfectly rational ethical line, but it tends to reinforce the “have”/”have not” divide – the haves decide to how much and when to give to the have-nots. Letting the advisory board make recommendations with separate board approval is a reasonable way to handle this, unless you’re seeking actual empowerment. But empowerment potentially opens the door to corruption to have folks empowered to direct dollars to their own pet projects.

It was with some interest, however, that I noted a specific clause in my largely boilerplate bylaws that allows board members to earn consulting fees from the foundation for performing whatever work they might normally perform professionally. I suppose that means if one of my board members were a laywer, perhaps I’d want to just use them to draft an expenditure responsibility contract, because I already trust them and know them to be competent, since they’re on my board. The Robin Hood foundation was recently criticized for doing just this sort of thing: that financial advisors who were on the board were earning fees for managing funds where Robin Hood had invested. I thought that was unethical, an investing friend thought it would be fine but of course they should have waived their fees (but they didn’t). There was a mix of opinion in the news as to whether or not this was unethical, so we have a prevailing social norm that maybe directing business to yourself is merely being prudent, not corrupt. The Robin Hood foundation did change the investments, however.

The Robin Hood example leaves us with a choice on the ethics of paying fees to board members for additional services (a foundation expense), but the law is fairly clear that paying grant monies to a board member via employment at a grantee (a foundation grant) is not ethical. Yet I perceive the latter example to have more distance, and thus less self-interest in the payment. Most interesting to me is that both foundation expenses and foundation grants count equally to the foundation’s annual 5% payout for tax purposes.

So why is there a clause in my boilerplate bylaws explicitly endorsing one of these behaviors? I can only assume it’s historical, from a perspective that there are those who are experienced and knowledgeable and not in need of grants, who of course do lots of internal cross-business, and there are those who need charity, destined to remain excluded from decision-making power.

This to me is an excellent example of institutionalized discrimination (to be very technical and specific, classism). My institution, reasonably following the examples of what’s been done before, has embedded within it default language that reinforces imbalanced power structures. To not take advantage of that language based on prevailing social norms is a weak correction; a strong commitment to undoing the institutionalized discrimination of the past means I need to actively question default power distribution, discover the institutional props behind it, and change them so equity is not about a prevailing social mood, but institutional structure. In this case, changing the structure would mean at least deleting the endorsement of fees to board members from my bylaws.

The baby boomers can claim civil rights marches and anti Vietnam demonstrations. For Gen X to lay a claim to history worth keeping, we need to take those grand visions and institutionalize them.

Today was the Stoel Rives Cleantech Forum, I saw it advertised in a recent PSBJ issue. As a private equity investor I was aware of the event, but I already had plans – I attended some events for local community leaders to hear Van Jones speak about the Green For All movement. The irony is that these two disconnected events – one focused on investors and business leaders, the other focused on nonprofit, community and philanthropic leaders, are actually both about our transition to a “green” economy. We are in a long term mega-trend of shifting from operating in a world where resources seem infinite and wilds are untamed, to a world where we’ve summited the highest peaks, mapped the bottoms of oceans and we now need to learn to respectfully manage the environmental resources we’ve mastered. Carbon trading, energy efficiency improvements, and new ways of doing things are where economic growth will come in the future, and where the good jobs will be.

The Cleantech Forum met to discuss investment possibilities to fund and grow the companies that will develop these new, more efficient ways of doing things. These new opportunities are entirely new industries and their next challenge down the road will be the lack of a trained workforce: workers who know how to work with solar panels, mechanics who understand alternative fuel vehicles, mariners who understand how to place a tidal turbine.

Van Jones’s particular genius is to recognize this period of structural economic shift as a new level playing field for workers – a genuine opportunity to bring in folks who have been left off the economic ladder by securing government funding for training and particularly targeting these left-behind groups. A targeted effort to retrain workers can help us strengthen our economy in the face of uncertainty, provide real opportunity and support these fledgling industries as well as their investors.

My interest in socially responsible investing is about bringing these two perspectives together and recognizing that the system is connected all the way through – the troubles low-income folks have getting good jobs are related to the troubles startup companies have securing the resources they need. These two events, in the same city at the same time, should really be in the same room rather than two different buildings and two different audiences.

I have heard Van speak before, but this time I heard an additional message – it’s not just about job training. We’ve got to work to bridge the class divide. In California they did a pilot project where they trained solar engineers. 21 made it through the strict program, zero got jobs, ultimately because of an inability of the largely white-middle class companies in the biz to relate to the working class folks of color enough to use their newly polished skills. Are there enough downsized college grads to fill these green-collar roles that we middle-class whites can shrug this off as “their problem”? There probably will be enough demand for workers that I can make a business case for learning to be better leaders and managers for working class folks. As I write it now, it’s apparent to me that “making a business case” simply means finding economic leverage. No wonder poverty has long been referred to as a cycle, if you have to have economic leverage to get economic access, how do you get out? I’m putting my leverage behind Green For All.